Rhode Island state regulators on Thursday approved, with conditions, the sale of two cash-strapped safety-net hospitals to an Atlanta-based nonprofit with no experience in managing hospitals.
The Rhode Island Department of Health and Attorney General Peter Neronha signed off on the possible acquisition of the hospitals’ parent, CharterCARE Health Partners, by the Centurion Foundation.
CharterCARE consists mostly of Roger Williams Medical Center in Providence and Our Lady of Fatima Hospital in North Providence. CharterCARE has been owned for more than 10 years by California-based Prospect Medical Holdings.
The two hospitals are among the top taxpayers and biggest employers in their respective communities.
Neronha’s conditions include funding a turnaround consultant to help raise the financial fortunes of Roger Williams and Fatima. Both have been losing money for years, and Neronha recently told The Public’s Radio that bankruptcy remains a risk with new ownership.
In a news release, Neronha’s office said his imposition of 40 conditions is meant to address what it called significant shortcomings and concerns with Centurion’s purchase of CharterCARE.
“Our team was guided by the baseline principle that Rhode Islanders deserve quality, accessible and affordable health care,” Neronha said. “We also know that the future of these hospitals is critical to the collective landscape of healthcare in Rhode Island. This decision and the conditions we have placed on the transfer of ownership were only arrived at after careful consideration and strong scrutiny.”
Brian Hodge, a spokesman for Neronha, said Centurion has not yet agreed to the conditions.
The conditions imposed by Neronha include a requirement for Centurion to pay outstanding bills from Roger Williams and Fatima, to correct life safety and physical plant problems at the hospitals, and for Centurion and Prospect Medical to cumulatively add $80 million to the books of the new organization.
Additional conditions:
- Prospect and Centurion are required to add an additional $66.8 million to a dedicated fund that Prospect can apply to outstanding escrow from a 2021 agreement with Neronha.
- Management fees for Centurion – which have not been publicly disclosed – will be paid only if the foundation remains in compliance with the approval agreement.
- “To mitigate poor management practices in the past by distant and self-interested owners, the board of the New CharterCARE System must adopt specific best governance practices, include local and community input, and may not alienate, encumber, or pledge New CharterCARE System’s assets without notice to and approval by the Attorney General.”
- Centurion must notify the AG’s office of any workforce reductions that meet a certain threshold.
In a statement, United Nurses and Allied Professionals, which represents about 1,200 workers at the two hospitals, said the conditions do not go far enough.
“Centurion does not have to put up a meaningful amount of their own capital, and the entire transaction relies on saddling these hospitals with more and more debt – to the tune of hundreds of millions of dollars, ” UNAP said. “When you consider the fact that CharterCare’s hospitals and healthcare facilities are losing tens of millions of dollars in operating costs every year, the decision makes even less sense. Since Centurion submitted their application, we have loudly and consistently sounded the alarm about their business model. The math simply does not work without them putting a meaningful amount of their own skin in the game. Our union is disappointed in this decision.”
There was no immediate comment from CharterCARE, which has worked with Centurion on the sale.
CharterCARE spokesman Otis Brown previously pointed to a “high confidence” letter from Barclays Capital in arguing that Centurion’s debt-financing plan is sound and sufficient to recapitalize the hospitals.
The health department is also imposing conditions on the sale.
DOH Director Jeffrey Lakin said in a statement, “In light of the historical and ongoing financial and operational challenges at the hospitals, RIDOH issued a decision today with conditions carefully developed to restore local control, help stabilize these two facilities, and help ensure that the new operators would be positioned to provide consistent, safe, high-quality care.”
The Health Services Council, an advisory group to RIDOH, still needs to approve the transaction.
Senate President Dominick Ruggerio, whose district includes Fatima, said this in a statement: “I am cautiously optimistic about the proposed sale of CharterCARE to the nonprofit Centurion Foundation, and pleased that the Attorney General has determined it should move forward following his thorough, statutorily-mandated review. I have been among those raising alarms about the financial condition of Fatima and Roger Williams under their current, for-profit ownership group, calling for an attorney general investigation into their finances as far back as 2017.”
Ruggerio added, “I am pleased with the opportunity to potentially stabilize and strengthen these vital community hospitals. I particularly want to note the commitment expressed by The Centurion Foundation to growing its network of primary care doctors, emergency room services, and other services, and to adding about 200 jobs in Rhode Island.”
This story has been updated with comment from United Nursing and Allied Professionals.
